Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Raysons Constructions Pty Limited v The Owners - Strata Plan No 87003 [2024] NSWCATAP 156 Hearing dates: On the papers Date of orders: 8 August 2024 Decision date: 08 August 2024 Jurisdiction: Appeal Panel Before: S Thode, Principal Member D Fairlie, Senior Member Decision: (1) Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 NSW, a hearing of the applications in respect of costs is dispensed with. (2) The Owners - Strata Plan No 87003 are to pay Raysons Constructions Pty Limited's costs of the appeal on the ordinary basis, as agreed or assessed. (3) The Owners - Strata Plan No 87003 are to pay Raysons Constructions Pty Limited's costs of Tribunal proceedings HB 20/49739 on the ordinary basis as agreed or assessed. Catchwords: COSTS – Calderbank letter – whether offer an adequate compromise – whether offeree not acting unreasonably in rejecting offer Legislation Cited: Civil and Administrative Tribunal Act 2013 NSW Home Building Act 1989 NSW Cases Cited: Calderbank v Calderbank 1975) 3 All ER 333Hazeldene's Chicken Farm Pty Ltd v Victorian Work Cover Authority (No 2) [2005] VSCA 298 Miwa Pty Limited v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Texts Cited: None cited Category: Costs Parties: Raysons Constructions Pty Limited (Costs applicant) The Owners – Strata Plan 87003 (Costs respondent) Representation: Counsel: G Carolan (Costs applicant) P Horobin (Costs respondent) Solicitors: Ray Wehbe & Co (Costs applicant) Chambers Russell (Costs respondent) File Number(s): 2023/00257814 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: Unreported Date of Decision: 14 July 2023 Before: R Titterton OAM, Senior Member File Number(s): HB 20/49739 REASONS FOR DECISION Introduction 1. On 20 June 2024 we upheld an appeal by the respondent at first instance, Raysons Constructions Pty Limited (the costs applicant). We granted leave to the costs applicant to appeal and set aside the orders below in the Tribunal made in favour of The Owners - Strata Plan 87003 (the costs respondent). The principal issue for determination in the Appeal was whether the time period for commencing proceedings for breach of the statutory warranties in the Home Building Act 1989 NSW (HBA), had expired. We formed the view that this time period had expired and that s18E(1)(e) of the HBA which extends that period, had not been enlivened. 2. Because the costs respondent was unsuccessful in the appeal, our preliminary view was that the costs of the appeal proceedings should "follow the event", and that the costs applicant would be entitled to its costs of the appeal on the ordinary basis. 3. Our preliminary view was expressed as order 5 in the orders that we made on 20 June 2024. However the order was subject to any other costs application that may be made by the parties. In the event of an application, we made orders and directions for the parties to file and serve their written submissions as to costs and directed that order 5 ceased to have effect pending our consideration of such application. Orders dispensing with a hearing on costs 1. We also directed the parties to address in their submissions whether, pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act), the Appeal Panel should dispense with a hearing on the costs issue, so that the issue would be decided on the papers without the appearance of the parties. We received submissions from the costs applicant and the costs respondent and a submission in reply from the costs applicant. Both parties accepted that that their applications could be adequately addressed in written submissions and consented to dispensing with a hearing on this issue. We agree, and accordingly we make an order dispensing with a hearing on costs pursuant to s 50(2) of the NCAT Act. The parties' submissions in relation to the costs of the appeal 1. The costs applicant said that it was content with our order 5, so that it was entitled to its costs of the appeal on the ordinary basis. The costs respondent conceded in paragraph 4 of its submission that order 5 was the appropriate order. Costs in the Tribunal proceedings 2. Costs had been reserved in the Tribunal proceedings. When the Reasons for Decision were published, the Senior Member directed the parties to provide draft orders reflecting those reasons and to make submissions in relation to costs. The costs applicant then filed its notice of appeal and neither party made any costs submissions nor filed any draft orders. Thus the costs of the Tribunal proceedings remains undetermined. 3. The costs applicant said that it should be entitled to its costs in the Tribunal and that the costs should be allowed on an indemnity basis from March 2022. 4. The costs respondent's initial position was that it objected to the costs applicant claiming its Tribunal costs in these appeal proceedings as these costs were not referred to in our orders and directions relating to costs. 5. Section 81 of the NCAT Act empowers the Appeal Panel to consider, and if appropriate make a costs order in relation to the Tribunal proceedings and we propose to do so in this instance, rather than remitting the question to the Tribunal. 6. The costs respondent's alternative proposition, set out at paragraph 7 of its submission was that: 7 Accordingly the builder should not be afforded an opportunity to make submissions in relation to those costs other than to the extent that it would be appropriate that the builder be award such costs on the ordinary basis in relation to the proceedings at first instance. 1. Whilst not a formal admission, we take this to be a tacit concession by the costs respondent that following our orders setting aside the Tribunal's decision, the costs applicant should be entitled to its costs on the ordinary basis. 2. Thus the real issue to be determined is whether all the costs in the Tribunal should be awarded on the ordinary basis, or whether some part should be ordered to be paid on an indemnity basis. 3. We understand the costs respondent's submission to be that is not appropriate for the Appeal Panel to consider the issue of indemnity costs because the settlement offers supporting the application (which we will refer to below), were made by the costs applicant in the Tribunal proceedings and not in the appeal proceedings. 4. We do not agree with this proposition. We propose to consider the costs applicant's arguments in support of indemnity costs. We do not consider the costs respondent to be disadvantaged by our taking this course because, notwithstanding its formal position in relation to indemnity costs, its submission proceeded to deal in detail with the substance of the costs applicant's arguments. The costs applicant's submission 1. The costs applicant attached to its submission two letters for its solicitors to the solicitors for the costs respondent. The first letter was dated 21 March 2022 and contained the following offer: 1. The second respondent (the costs applicant) to pay to the applicant (the costs respondent) the sum of $100,000 plus costs as agreed or assessed. 2. The parties to enter into a deed in settlement or release with the proceedings to be discontinued 1. The second letter was dated 27 June 2022. The offer was in identical terms save the amount had been increased from $100,000 to $150,000. Both offers were said to be made "under the principles in Calderbank v Calderbank (1975) 3 All ER 333" (Calderbank) and were open for acceptance for 28 days. 2. The costs respondent did not accept either offer. The costs applicant says that because the Appeal Panel's decision was less favourable to the costs respondent than the amount offered in its March 2022 letter, it is entitled to an order that its costs of the Tribunal proceedings be paid on an indemnity basis from 22 March 2022. Alternatively, it relies on the 27 June 2022 letter "to the extent that it offered a substantial increase in the compensation the appellant was prepared to offer and therefore the extent of the compromise being made by the appellant." 3. The costs applicant referred us to Miwa Pty Limited v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa), where Basten JA posed two questions to be considered when assessing a Calderbank offer, being: 1. Whether it was a genuine offer of compromise; and 2. Whether it was unreasonable for the offeree not to accept it. 1. The submission then referred to a list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian Work Cover Authority (No2) [2005] VSCA 298 (Hazeldene), to be considered when assessing a Calderbank offer. These were adopted by Basten J in Miwa. They were: 1. the stage of the proceedings at which the offer was received; 2. the time allowed for the offeree to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, as assessed at the date of the offer; 5. the clarity with which the terms of the offer were expressed; 6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it. 1. The costs applicant said that the offers satisfied each of the elements identified in Hazeldene. They represented a genuine compromise and that it was unreasonable for the costs respondent not to have accepted them. It noted that it had first raised the issue that the cost respondent's application had been commenced out of time in its points of defence filed on 24 March 2021. The costs respondent's submission 1. The costs respondent said that it was not unreasonable for it to refuse to accept the offers. It said: 11. In Miwa, Basten J observed that in considering whether it was unreasonable for a party to reject a genuine offer of compromise, the court did not need to "revisit the arguments at trial or on appeal, it is sufficient to note that the respondent was successful before the primary judge, in respect of issues involving some legal complexity. Its ultimate failure in this court did demonstrate that its prospects of success, as assessed at the date of the offer, were other than reasonable". Accordingly, Basten JA concluded that the rejection of the offer was not unreasonable. 12. Further, notwithstanding what was said in the builder's submissions, neither letter of offer from the builder refers to any jurisdictional or warranty period issue, much less that the owners corporation claim was bound to fail. The builder's (first) letter referred to deficiencies in the owners corporations' expert evidence. However the owners corporation's expert evidence was largely preferred at first instance and the finding of major defects was not overturned on appeal. 13.Secondly the application of Section 18(1)(e) (sic) of the Home Building Act 1989 in this context has not been the subject of prior determination by the tribunal or a court. That is why neither party could direct the tribunal or appeal panel to a similar case nor did the Appeal Panel cite any case as authority. 14. Third, the offer was an offer of money in circumstances where the owners had sought an order for the rectification of the various defects. That is why the owners corporation had made its own offer of compromise on 1 September 2022, in which it sought for the builder to rectify certain defects rather than pay a monetary sum also. The costs applicant's submission in reply 1. The costs applicant rejected each of these arguments. It annexed a letter from the costs respondent's solicitors to its solicitors dated 4 March 2022, that is before it had made its first offer, which attached a formal offer of compromise from the costs respondent to the effect that the costs applicant should pay $500,000 to it in final settlement of the proceedings. 2. It noted that the 4 March 2022 letter referred not only to the question of the parties' expert evidence, but also to "the contentious defence…… that the proceedings were commenced outside the statutory warranty period", and that "our client will be successful in responding to it in circumstances where section 18(1)(e) provides for an extension of time for the commencement of proceedings where the breach of warranty becomes apparent within the last 6 months of the warranty period." 3. The submission also noted that, contrary to the costs respondent's submission, its offer of compromise was in the form of a monetary settlement not an order for rectification. The 1 September 2022 defects rectification offer, referred to in paragraph 14 of the costs respondent's submission, was not in evidence before us. Our findings 1. The costs applicant's letters of offer, in our view, comply with the formal requirements of Calderbank letters. They were expressed with clarity, provided sufficient time for the costs respondent to respond and made it clear that if not accepted and the Tribunal's decision was less favourable to the costs respondent, the costs applicant would seek indemnity costs. To that extent they were genuine offers of compromise. 2. Whilst the Tribunal's decision initially provided a more favourable outcome to the costs respondent than the amount of compensation offered in the letters, the Appeal Panel's decision setting aside those orders reversed that position, and in its notice of appeal, the costs applicant had sought an order that the Tribunal's decision be set aside with costs. 3. In those circumstances we believe that the Appeal Panel is entitled to take into account the Calderbank letters, and also the offer of compromise made by the costs respondent, when considering costs in the Tribunal proceedings and whether an award of indemnity costs is appropriate. We do not consider it necessary for the costs applicant to have restated these or similar offers in the appeal proceedings. 4. The real question then to be determined is the second question posed in Miwa, that is whether it was unreasonable for the costs respondent to reject the offers. Two of the factors referred to in Hazeldene to be taken into account when considering this issue, and which the costs respondent relied on, seem to us to be persuasive. 5. The first is the offeree's prospects of success. We agree with the submission that whilst ultimately unsuccessful, the costs respondent's position that it was entitled to the benefit of the six month extension to the statutory warranty period, was not entirely unarguable. 6. As we observed in our decision at paragraph [78], this issue involved a question of mixed fact and law. The factual component to be determined was when had the owners corporation become aware that their apartment building contained structural defects which might entitle them to commence proceedings for breach of the statutory remedies under the HBA. The legal issue to be considered was the proper construction of s 18(E)(1)(e) of the HBA, which, as the parties noted, was not the subject of any relevant prior determination by the Tribunal or a court. 7. The other factor is the extent of the compromise in the costs applicant's offers of $100,000 and $150,000. 8. It is not easy to assess the costs respondent's claim measured as an award of damages. The Tribunal's decision made detailed findings about each of the alleged defects, and in particular whether they were "major defects" as defined in s 18E(4) of the HBA. The Tribunal accepted that many of the defects were major defects, which enabled the costs respondent to rely on the six year limitation period, but disallowed others. However the Reasons for Decision did not set out the cost of rectification of those defects found to be major defects because the Tribunal had determined that the appropriate remedy was a rectification order. 9. In paragraph 3.2 of its solicitor's 22 March 2022 letter, there is a comment that "our client's claim against your client exceeds $1.3 million in rectification costs". Whether the amount of $1.3 million represented a true estimate of the cost of rectification we are unable to say, but we can assume that the amount was at least greater than its March 2022 offer of compromise of $500,000. 10. In the appeal proceedings the amount on dispute appeared to be much less than this amount, however our task is to assess the offeree's prospects of success at the time the offer was made and not with the benefit of hindsight. 11. As at March 2022 the legal and factual issues to be determined in relation to the construction of s18(E)(1)(e) of the HBA, and the factual issues to be determined as to which defects amounted to "major defects", entitled the costs respondent to form the view that the offer of $100,000 was not an adequate compromise and to reject it. Nothing relevantly had changed by the time the second offer of $150,000 was received in June 2022. 12. We have therefore come to the view that it was not unreasonable for the costs respondent and those advising it to reject the offers of $100,000 and $150,000 and we decline to make an order that any part of the costs of the Tribunal proceedings be payable on an indemnity basis, and that the costs should be paid on the ordinary basis. Orders 1. We make the following orders: 1. Pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 NSW, a hearing of the applications in respect of costs is dispensed with. 2. The Owners - Strata Plan 87003 are to pay Raysons Constructions Pty Limited's costs of the appeal on the ordinary basis as agreed or assessed. 3. The Owners - Strata Plan 87003 are to pay Raysons Constructions Pty Limited's costs of Tribunal Proceedings HB 20/49739 on the ordinary basis as agreed or assessed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2024